Still Gaining, Still Overbought

• The FBM KLCI traded mostly in the positive territory, lifted by the stronger Ringgit despite mild profit-taking in selected banking stocks. Tracking the Main Board, the lower liners – the FBM Fledgling (+0.4%) and the FBM Ace (+1.0%) also rallied, together with the broader constituents.

• Market breadth was upbeat as winners took over the losers on ratio of 452-to- 360 stocks. Traded volumes, however, lost 8.4% to 2.56 bln shares after Malaysia’s exports data in September missed analysts’ expectations amid slowing global demand.

• Petronas-linked affiliates like Petronas Chemicals (+14.0 sen) and Petronas Dagangan (+14.0 sen) gained, together with Nestle (+RM2.30), Kuala Lumpur Kepong (+28.0 sen) and Hartalega (+17.0 sen). Broader market gainers, meanwhile, were Bintulu Port (+26.0 sen), KESM Industries (+22.0 sen), Petron Malaysia (+22.0 sen), Hengyuan Refining (+17.0 sen) and Carlsberg (+16.0 sen).

• In contrast, BAT (-34.0 sen), Aeon Credit (-18.0 sen), Fraser & Neave (-14.0 sen), Uzma (-9.5 sen) and Malaysian Pacific Industries (-8.0 sen) were the main broad market losers. Only four heavyweights weighed on the key-index, namely; Hong Leong Bank (-14.0 sen), IHH Healthcare (-3.0 sen), RHB Bank (- 3.0 sen) and CIMB (-1.0 sen).

• Major Asian stockmarkets closed mostly higher, lifted by the easing U.S.- China trade tension and anticipation of an initial trade deal between two powerhouses. Japan was closed for holidays, while the Hang Seng index (+1.7%) and the Shanghai Composite (+0.7%) rallied. Similarly, the majority of the ASEAN equities also gained ground at Monday's close.

• U.S. equity markets continue to scale new highs at the start of the week as the trade negotiations between the U.S and China looks promising that could cumulate in an agreement soon. The Dow netted another 0.4% gain, with the broader S&P 500 index following suit with another 0.4% improvement. However, the Nasdaq’s gains were more marginal.

• Earlier, European equities closed near their two-year highs, also buoyed by the optimism over a trade deal between the U.S. and China, that was further buoyed by encouraging results by leading lowcost carrier, Ryanair. The FTSE rose nearly 1.0%, while the CAC and DAX posted gains of more than 1.0% to start the week.
  
  THE DAY AHEAD

• The FBM KLCI’s recent gains are stronger-than-anticipated as institutions, particularly locals, are taking cue from the increased positivity in global equity markets to provide the lift for the indexlinked stocks even as foreign players were net sellers yesterday. The gains are also sending the key index further into the overbought zone with few signs of a pullback as yet.

• Under the prevailing environment, we see the overbought streak continuing as the underlying market tone remains firm, backed by the progress in the trade negotiations between the U.S. and China that also pushed Wall Street indices to new record highs.

• Unless there is a significantly firmer push, however, we still believe that the upsides should be measured due to the overbought conditions. On the upside, the resistances are now at 1,610 and 1,620 respectively, while the 1,600 points level is the immediate support, followed by the 1,590 points level.

• While the index heavyweights are making headway, the lower liners and broader market shares are dithering after their recent gains, due in part to their overbought conditions. Even with the more encouraging market undertone, we see the hesitation among the stocks mentioned in the above indices continuing as the toppish conditions are still prevailing and they are still due for a pullback.
  
  COMPANY BRIEF

• MMAG Holdings Bhd is planning to sell a piece of freehold vacant industrial land in Klang for RM13.0 mln in cash to Acter Carton Enterprise Sdn Bhd. The land, which was purchased on 18th June last year at a cost RM12.7 mln, measured about 18,381 sq.m., has a net book value of RM13.0 mln.

• The disposal proceeds will be used for the purchase of two freehold parcels with buildings located at Kawasan Perusahaan Valdor, Pulau Pinang. (The Edge Daily)

• Cuscapi Bhd has entered into a MoU with Zando Technologies Co Ltd to collaborate in offering competitive solutions to endcustomers in Myanmar’s food and beverage (F&B) industry. The latter is a Myanmar-based company involved in systems integration and IT solutions for shopping complexes and F&B.

• Moving forward, Cuscapi expects to explore business opportunities and expansion into Myanmar’s F&B market, as well as offer its new C360 Engage Point of Sales and restaurant management solutions. (The Edge Daily)

• Mesiniaga Bhd has secured a contract worth RM16.1 mln from the Employees Provident Fund (EPF) for the supply of computer hardware, software, maintenance and IT-related services. The contract will begin on 11th November 2019 and the delivery of the computer hardware and software is expected to be completed within five months.

• Meanwhile, the warranty period will be for a duration of three years, with an option to extend the warranty period for the fourth and fifth year at a fixed price of RM250,000 per year. (The Edge Daily)

• DRB-Hicom Bhd has made a lodgement with the Securities Commission Malaysia (SC) to establish a 30-year Islamic Medium Term Notes programme of up to RM3.5 bln in nominal value (sukuk wakalah programme). The sukuk wakalah programme has been assigned a preliminary rating of A+IS, with a positive outlook, by Malaysian Rating Corp Bhd (MARC).

• MARC is sanguine on the company’s as it indicates DRB-Hicom's improved consolidated credit profile after streamlining its businesses by divesting investments and non-core assets and improving its operating margins and liquidity position.

• The proceeds from the programme will be used to refinance the existing borrowings of the group, for capital expenditure and working capital requirements and to pay all fees and expenses in connection with the sukuk wakalah programme. (The Star Online)

• Four shareholders of Seacera Group Bhd have issued a notice of resolutions entailing the nomination of six new directors to the board at the group's upcoming annual general meeting (AGM). The shareholders involved are Ng Wai Yuan, Datin Sek Chian Nee, Low Swee Foong and Datuk Tan Wei Lian, holding a collective stake of 2.5% in the company. Meanwhile, the proposed assignments include Rivzi Abdul Halim, Datin Ida Suzaini Abdullah, Marzuki Hussain, Tan Lee Chin, Ong Eng Taik and Ramnath R. Sundaram. (The Edge Daily)

Source: Mplus Research - 5 Nov 2019